Christmas is just around the corner and it’s an exciting time to indulge in the festivities and relax with your family. It’s also a period where many couples decide to have a baby and according to the Office of National Statistics, September is the most popular birth month in England and Wales which suggests babies are more likely to be conceived around Christmas.
Starting a family is an exciting new chapter of life. It’s also a significant financial commitment and getting a financial plan sorted for the new arrival(s) will prevent problems later down the line.
Here at Budget Insurance we’ve provided a few tips to ensure you’re prepared for the new person coming into your lives.
What’s the average cost of raising a baby in the UK?
A recent study by Loughborough University’s Centre for Research in Social Policy found that raising a child to the age of 18 will cost couples £150,753.
Education and childcare costs are typically the biggest expense for parents. The Family and Childcare Trust estimate that the average nursery for a two-year old cost £122 per week. To help out with this substantial cost, the Government provide support for both childcare and education, along with many other benefits to ease the expense of raising a child. For more information, check out the next segment on benefits you can claim from having a baby.
Other significant costs are food, clothing and furniture and next down the line is leisure and recreation, which would include funding hobbies, after school clubs, toys and activities. There are various checklists online which can help you break down the full costs of raising a child.
Another cost which isn’t directly associated with having a child is life insurance. While life insurance may not even be a consideration when starting a family, if you are the main earner of the household and your family depend on your income then it’s important to have a safety net should something happen.
Life insurance can provide your dependents payment as a lump sum or in regular intervals should you pass away. The sum depends on the level of cover you decide to purchase. For more information on the different types of policies visit our life insurance page.
What benefits can you claim when having a baby?
There’s plenty of maternity and paternity benefits in the UK to help support you during this time, which you may be eligible for, these include:
- Working tax credit
- Free prescriptions and NHS dental treatment
- Antenatal care
- Statuary maternity & paternity leave and pay
- Maternity allowance (if you can’t claim maternity pay)
- Shared paternal leave and pay
- Statuary adoption leaves and pay
- Childcare costs*
*Working families are entitled to claim 20% of childcare costs and up to a maximum of £2000 per year under the Tax-Free Childcare scheme. To be eligible for this families must be working and have an income of at least £125.28 per week.
For those who aren’t working or have an income under the threshold, you could be eligible for other benefits to help you, which include:
- Sure Start Maternity Grant
- Employment support and allowance
- Income support
- Parents on Universal Credit or Working Tax Credit are also eligible to claim back childcare, while all parents of a child aged 3 – 4 are entitled to 15 hours free child care a week
For more information on childcare and other support available for maternity and paternity, visit the Government’s guide.
Top tips for budgeting
Everyone prefers managing their finances in different ways, whether you’re financially secure or looking to save the pounds, here are a few tips to managing your finances when you’ve had a baby.
Understand your expenses
First things first, to understand where you can cut back it’s essential to track your outgoings, you can then break these down into categories such as:
- Health and wellbeing
Set a budget
Once you’re up to speed with your spend you can set yourself a budget to stick to. You could either set one for total outgoings or have a more granular approach and set one for each spend category, so you know where your savings are coming from.
Use budgeting tools
It’s worth searching the web or app store to find budgeting tools which could make your life easier. There are many financial apps available which automatically categories your expenditure, allowing you to easily see the areas you can cut back. Many of these tools also have built in features which allow you to set goals and automatically put aside money each month to save, so you don’t have to consciously think about it.
Keep an emergency fund
With another person in the family there’s a little extra risk should something happen to them, so having an emergency fund in place can give you another lifeline to fall back on. A commonly followed rule is that you should put away 3 – 6-month salary in an instant-access savings account.
Stick within your means
It may go without saying and we’re often completely aware of when we over-spend or purchase something that’s financially irresponsible.
Be disciplined and ruthless when it comes to your spending and try to cut out compulsive purchases. Before you buy an expensive item, step back a second and ask yourself the following:
How much of my working time does this cost? (looking at money in terms of time taken to earn rather than monetary value often allows people to view it from a different perspective).
- Will I use it?
- Can I afford it?
- Do I need it?
For more financial tips, see our other helpful content on money.